MADRIGAL PHARMACEUTICALS, INC. Discussion and analysis of management’s financial situation and results of operations. (Form 10-Q)

MADRIGAL PHARMACEUTICALS, INC.  Discussion and analysis of management’s financial situation and results of operations.  (Form 10-Q)
The consolidated financial statements, included elsewhere in this Quarterly
Report on Form 10-Q, and this Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read together with our audited
financial statements and accompanying notes for year ended December 31, 2021 and
the related Management's Discussion and Analysis of Financial Condition and
Results of Operations, both of which are included in our Annual Report on Form
10-K. In addition to historical information, this discussion and analysis
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of
the Securities Exchange Act of 1934, as amended, or the Exchange Act, that
involve risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. As disclosed in this report under "Cautionary Note
Regarding Forward-Looking Statements," our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in the "Cautionary Note Regarding Forward-Looking
Statements" and "Risk Factors" sections contained in our Annual Report on Form
10-K for the year ended December 31, 2021 and our Form 10-Q for the quarter
ended March 31, 2022. Our operating results are not necessarily indicative of
results that may occur for the full fiscal year or any other future period.

On Madrigal Pharmaceuticals, Inc.


Our Focus. We are a clinical-stage biopharmaceutical company pursuing novel
therapeutics for nonalcoholic steatohepatitis (NASH), a liver disease with high
unmet medical need. Our lead product candidate, resmetirom, is a proprietary,
liver-directed, selective thyroid hormone receptor-ß, or THR-ß, agonist being
developed as a once-daily oral pill that can potentially be used to treat NASH
and a number of disease states with high unmet medical need.

Our Patient Market Opportunity. NASH is a serious inflammatory form of
nonalcoholic fatty liver disease, or NAFLD. NAFLD has become the most common
liver disease in the United States and other developed countries and is
characterized by an accumulation of fat in the liver with no other apparent
causes. NASH can progress to cirrhosis or liver failure, require liver
transplantation and can also result in liver cancer. Progression of NASH to end
stage liver disease will soon surpass all other causes of liver failure
requiring liver transplantation. Importantly, beyond these critical conditions,
NASH and NAFLD patients additionally suffer heightened cardiovascular risk and,
in fact, die more frequently from cardiovascular events than from liver disease.
NASH and NAFLD have grown as a consequence of rising worldwide obesity-related
disorders. In the United States, NAFLD is estimated to affect approximately 25%
of the population, and approximately 25% of those will progress from NAFLD to
NASH. Current estimates place NASH prevalence at approximately 20 million people
in the United States, or five to six percent of the adult population, with
similar prevalence in Europe and Asia. The prevalence of NASH is also increasing
in developing regions due to the adoption of a more sedentary lifestyle and a
diet consisting of processed foods with high fat and fructose content.

Our Completed Studies. For NASH, we enrolled 125 patients in a Phase 2 clinical
trial with resmetirom. We achieved the 12-week primary endpoint for this Phase 2
clinical trial and reported the results in December 2017, and we reported
positive topline 36-week results at the conclusion of the Phase 2 clinical trial
in May 2018. We also completed a 36-week, open-label extension study in 31
participating NASH patients from our Phase 2 clinical trial, which included 14
patients who received placebo in the main study.

On December 18, 2019 the Company announced it had opened for enrollment
MAESTRO-NAFLD-1, a 52-week, non-invasive, multi-center, double-blind,
placebo-controlled Phase 3 clinical study of patients with biopsy-confirmed or
presumed NASH recruited from sites in the U.S. Key endpoints are safety,
including safety biomarkers. Secondary endpoints include LDL cholesterol, lipid
biomarkers, MRI-PDFF, NASH and fibrosis biomarkers. Except for serial liver
biopsies, the study protocol is similar to the MAESTRO-NASH study (discussed
below under "-Our Ongoing and Planned Studies"), with resmetirom doses of 80 mg
or 100 mg or placebo. Enrollment objectives for this study were exceeded, with
approximately 1,300 patients enrolled overall. The MAESTRO-NAFLD-1 study will
help support the adequacy of the safety database at the time of NDA submission
for Subpart H approval for treatment of NASH in patients with F2 or F3 fibrosis.
In November of 2021, we reported data from the open label non-cirrhotic arm of
MAESTRO-NAFLD-1, and in January 2022 we announced that we achieved primary and
secondary endpoints for the double-blind portion of MAESTRO-NAFLD-1. Further
MAESTRO-NAFLD-1 data were presented at a hepatology medical congress in June of
2022. MAESTRO-NAFLD-1 has completed the double-blind arms and an open-label 100
mg arm. An additional open-label active treatment arm in patients with early
(well-compensated) NASH cirrhosis is ongoing.

We also completed a 116 patient Phase 2 clinical trial and announced results in
February 2018 for the use of resmetirom in patients with heterozygous familial
hypercholesterolemia, or HeFH. In addition to the NASH and HeFH Phase 2 clinical
trials, resmetirom has also been studied in multiple completed Phase 1 trials in
a total of more than 300 subjects. Resmetirom was well-tolerated in these
trials, which included a single ascending dose trial, a multiple ascending dose
trial, several drug interaction studies, a multiple dose mass balance study, a
single dose relative bioavailability study of tablet formulation versus capsule
formulation, a multiple dose drug interaction study, a multiple dose drug
interaction with food effect study, and a hepatic impairment study.

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Our Ongoing and Planned Studies. On March 28, 2019, the Company announced that
it had initiated MAESTRO-NASH, a Phase 3 trial in NASH with its once daily, oral
thyroid hormone receptor beta selective agonist, resmetirom. This double-blind,
placebo-controlled study is being conducted at more than 230 sites in the United
States and the rest of the world. Patients with liver biopsy confirmed NASH with
stage 2 or 3 fibrosis are being randomized 1:1:1 to receive a single oral daily
dose of placebo, resmetirom 80 mg or resmetirom 100 mg. A second liver biopsy at
week 52 in the first 900 patients will be the basis of filing for accelerated
approval under subpart H of applicable FDA regulations, which we refer to as
subpart H-accelerated approval. Historically: the primary endpoint pertained to
the percent of patients treated with either dose of resmetirom as compared with
placebo who achieve NASH resolution on the week 52 liver biopsy, defined as the
absence of hepatocyte ballooning (score=0), and minimal lobular inflammation
(score 0-1), associated with at least a 2-point reduction in NAS (NAFLD Activity
Score), and no worsening of fibrosis stage; and two key secondary endpoints
pertained to reduction in LDL-cholesterol and a 1-point or more improvement in
fibrosis stage on the week 52 biopsy with no worsening of NASH. In May 2022, the
Company announced that it determined to move the 1-point fibrosis endpoint up
the hierarchy in our MAESTRO-NASH trial to a primary endpoint along with NASH
resolution, as dual primary endpoints. The dual primary endpoint design allows
for a successful outcome of the study, which can be filed for subpart H
approval, if either the NASH resolution or 1-point fibrosis reduction endpoint
is met. Patients will continue in the study for a total of approximately 54
months, and will be evaluated for a composite clinical outcome including
cirrhosis on liver biopsy, or a liver related event such as hepatic
decompensation. The total anticipated enrollment currently is up to 2,000
patients, and will include up to 15% high risk F1 fibrosis stage NASH patients
whose efficacy responses will be evaluated as exploratory endpoints. On June 30,
2021 we announced our achievement of the requisite enrollment of patients to
support the planned Subpart H (Accelerated Approval of New Drugs for Serious or
Life-Threatening Illnesses) submission to the US Food and Drug Administration
(FDA).

In July 13, 2021 We announce the first patient dosed in a planned 52-week open-label active treatment extension study of MAESTRO-NAFLD-1, called MAESTRO-NAFLD-Open Label Extension (OLE). The OLE study allows patients who complete MAESTRO-NAFLD-1 to consent to 52 weeks of active treatment with resmetirom, making this treatment available to both patients who were assigned placebo in MAESTRO-NAFLD-1 and those patients who were taking resmetirom in MAESTRO-NAFLD-1.

key developments

MAESTRO-NAFLD-1 phase 3 additional data


In January 2022, we announced that certain primary and key secondary endpoints
from the double-blind, placebo-controlled, 969-patient MAESTRO-NAFLD-1 safety
study were achieved; resmetirom was well-tolerated and provided significant
reductions in liver fat, LDL-c and other atherogenic lipids vs. placebo.

In May 2022 and June 2022, we announced additional data and results from the
MAESTRO-NAFLD-1 safety study, as described below. Patients in the resmetirom 80
mg and 100 mg double-blind arms achieved reductions in ALT (p=0.002; <0.0001)
relative to placebo. ALT increases ?3 times the upper limit of normal occurred
in 0.61% in the resmetirom 80 mg group, 0.31% in the 100 mg group and 1.6% of
patients in the placebo group.

Treatment-emergent adverse events ? grade 3 in severity occurred in 7.6% of
patients in the resmetirom 80 mg group, 9.0% in the 100 mg group and 9.1% in the
placebo group. Withdrawals due to adverse events were 2.4% in the 80 mg group,
2.8% in the 100 mg group and 1.3% in the placebo group. GI-related adverse
events (diarrhea, nausea) were increased relative to placebo at the initiation
of therapy but not after the first few weeks.

FibroScan CAP (controlled attenuation parameter) scores reflective of hepatic
fat were statistically significantly (p<0.0001) reduced in resmetirom arms as
compared with placebo. FibroScan liver stiffness reductions were similar in the
100 mg open-label and double-blind arms. Responder analyses of FibroScan
(vibration-controlled transient elastography (VCTE) reduction and % reduction
from baseline comparing resmetirom 100 mg open-label and double-blind arms with
placebo showed a significant increase in responders in resmetirom treatment arms
(44% averaged across the arms) compared with placebo (25%); magnetic resonance
elastography (MRE) responders as measured by kPa reduction were significantly
greater in resmetirom-treated groups compared with placebo. Mean reduction in
FibroScan VCTE in resmetirom double-blind patients was greater than placebo but
not statistically significant.

MAESTRO-NASH outcome study


In August 2022, we initiated a second NASH outcomes study, MAESTRO-NASH
Outcomes, a randomized double-blind placebo-controlled study in approximately
700 patients with early NASH cirrhosis to allow for non-invasive monitoring of
progression to liver decompensation events. Several biomarker and imaging
techniques will also be employed to assess correlates with disease progression.
Ongoing open-label studies of more than 180 patients with well-compensated NASH
cirrhosis (MAESTRO-NAFLD-1 open-label arm) support the potential of resmetirom
in this patient population.

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We hope that a positive result in MAESTRO-NASH Outcomes could support full approval of resmetirom for non-cirrhotic NASH and could accelerate the timeline to full approval. Additionally, this study has the potential to expand the resmetirom label to include NASH patients with compensated cirrhosis.

Loan facility to support expansion of clinical development program and acceleration for potential launch of resmetirom


We secured a $250 million Loan Facility ("Loan Facility") with Hercules Capital,
Inc ("Hercules") in May 2022. The committed capital strengthens our balance
sheet, providing an additional source of funding both to support the expanded
clinical program and ramp-up for a potential launch of resmetirom in the U.S.

Under the terms of the Loan Facility, $50 million was drawn at closing. We may
also draw up to an additional $125 million in two separate tranches upon
achievement of resmetirom clinical and regulatory milestones and conditions. An
additional $75 million may be drawn by us, subject to the approval of Hercules.
The Loan Facility has a minimum interest rate of 7.45% and adjusts with changes
in the prime rate. We will pay interest-only for a period of 30 months, which
may be extended to 60 months upon the achievement of certain clinical and
regulatory milestones. The loan matures in May 2026 and may be extended an
additional year upon the achievement of certain clinical and regulatory
milestones.

basis of presentation

Research and development expenses


Research and development expenses primarily consist of costs associated with our
research activities, including the preclinical and clinical development of our
product candidates. We expense our research and development expenses as
incurred. We contract with clinical research organizations to manage our
clinical trials under agreed upon budgets for each study, with oversight by our
clinical program managers. We account for nonrefundable advance payments for
goods and services that will be used in future research and development
activities as expenses when the service has been performed or when the goods
have been received. Manufacturing expense includes costs associated with drug
formulation development and clinical drug production. We do not track employee
and facility related research and development costs by project, as we typically
use our employee and infrastructure resources across multiple research and
development programs. We believe that the allocation of such costs would be
arbitrary and not be meaningful.

Our research and development expenses consist mainly of:

  •   salaries and related expense, including stock-based compensation;



        •    external expenses paid to clinical trial sites, contract research
             organizations, laboratories, database software and consultants that
             conduct clinical trials;


• expenses related to the development and production of non-clinical drugs and

             clinical trial supplies, including fees paid to contract
             manufacturers;



  •   expenses related to preclinical studies;


• expenses related to compliance with drug development regulations

             requirements; and


• other allocated expenses, including direct and allocated expenses

             for depreciation of equipment and other supplies.


We expect to continue to incur substantial expenses related to our development
activities for the foreseeable future as we conduct our clinical studies
programs, manufacturing and toxicology studies. Product candidates in later
stages of clinical development generally have higher development costs than
those in earlier stages of clinical development, primarily due to the increased
size and duration of later stage clinical trials, additional drug manufacturing
requirements, and later stage toxicology studies such as carcinogenicity
studies. Our research and development expenses have increased period over period
in each of 2022 and 2021 and we expect that our research and development
expenses will increase in the future, including as a result of our MAESTRO-NASH
Outcomes study discussed in -"Key Developments" above. The process of conducting
preclinical studies and clinical trials necessary to obtain regulatory approval
is costly and time consuming. The probability of success for each product
candidate is affected by numerous factors, including preclinical data, clinical
data, competition, manufacturing capability and commercial viability.
Accordingly, we may never succeed in achieving marketing approval for any of our
product candidates.

Completion dates and costs for our clinical development programs as well as our
research program can vary significantly for each current and future product
candidate and are difficult to predict. As a result, we cannot estimate with any
degree of certainty the costs we will incur in connection with the development
of our product candidates at this point in time. We expect that we will make

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determinations as to which programs and product candidates to pursue and how
much funding to direct to each program and product candidate on an ongoing basis
in response to the scientific success of research, results of ongoing and future
clinical trials, potential collaborative agreements with respect to programs or
potential product candidates, as well as ongoing assessments as to each current
or future product candidate's commercial potential.

General and adminsitrative expenses


General and administrative expenses consist primarily of salaries, benefits and
stock-based compensation expenses for employees, management costs, costs
associated with obtaining and maintaining our patent portfolio, professional
fees for accounting, auditing, consulting and legal services, and allocated
overhead expenses. We expect that our general and administrative expenses may
increase in the future as we expand our operating activities, maintain and
expand our patent portfolio and incur additional costs associated with being a
public company and maintaining compliance with exchange listing and SEC
requirements. We expect these potential increases will likely include management
costs, legal fees, accounting fees, directors' and officers' liability insurance
premiums and expenses associated with investor relations.

Critical Accounting Policies and Estimates


Our management's discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amount of assets, liabilities, and expenses
and the disclosure of contingent assets and liabilities as of the date of the
financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to accrued research and development expenses
and stock-based compensation expense. We base our estimates on historical
experience, known trends and events, and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ materially
from these estimates under different assumptions or conditions. There have been
no material changes in our critical accounting policies and significant
judgments and estimates during the nine months ended September 30, 2022, as
compared to those disclosed in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2021 filed with the SEC on February 25, 2022.

Results of Operations

three months finished September 30, 2022 and 2021

The following table provides comparative unaudited results of operations for the three months ended September 30, 2022 and 2021 (in thousands):


                                             Three Months Ended September 30,            Increase / (Decrease)
                                               2022                    2021                 $                %

Research and development expenses $68,271 $54,873

            13,398            24 %
General and Administrative Expenses                12,141                   8,287             3,854            47 %
Interest (Income)                                    (717 )                   (60 )             657          1095 %
Interest Expense                                    1,502                      -              1,502           100 %

                                          $        81,197         $        63,100            18,097            29 %


Revenue

We had no income for the three months ended September 30, 2022 and 2021.

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Research and development expenses


Our research and development expenses were $68.3 million for the three months
ended September 30, 2022, compared to $54.9 million in the corresponding period
in 2021. Research and development expenses increased by $13.4 million in the
2022 period due primarily to the additional activities related to our Phase 3
clinical trials, an increase in head count, and an increase in stock
compensation expense. We expect our research and development expenses to
increase as we advance our clinical and preclinical development programs for
resmetirom.

General and adminsitrative expenses


Our general and administrative expenses were $12.1 million for the three months
ended September 30, 2022, compared to $8.3 million in the corresponding period
in 2021. General and administrative expenses increased by $3.9 million in the
2022 period due primarily to increases in commercial preparation activities,
including a corresponding increase in head count, and an increase in stock
compensation expense. We believe our general and administrative expenses may
increase over time as we advance our clinical and preclinical development
programs for resmetirom, prepare for commercialization, and expand our operating
activities, which will likely result in an increase in our headcount, consulting
services, and related overhead needed to support those efforts.

Interest income

Our net interest income was $0.7 million for the three months ended
September 30, 2022compared to $0.1 million in the corresponding period in 2021. The increase in interest income was mainly due to higher interest rates in 2022.


Interest Expense

Our interest expense was $1.5 million for the three months ended September 30,
2022, compared to $0 million in the corresponding period in 2021. The increase
in interest expense was as a result of the Loan Facility we entered into with
Hercules during the second quarter of 2022.

nine months ended September 30, 2022 and 2021

The following table provides comparative unaudited results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):


                                             Nine Months Ended September 30,            Increase / (Decrease)
                                              2022                    2021                 $                %

Research and development expenses $174,699 $152,275

            22,424            15 %
General and Administrative Expenses               33,573                  25,606             7,967            31 %
Interest (Income)                                 (1,109 )                  (311 )             798           257 %
Interest Expense                                   2,282                      -              2,282           100 %
Other (income)                                        -                     (273 )            (273 )        (100 %)

                                         $       209,445         $       177,297            32,148            18 %


Revenue

We had no income for the nine months ended September 30, 2022 and 2021.

Research and development expenses


Our research and development expenses were $174.7 million for the nine months
ended September 30, 2022, compared to $152.3 million in the corresponding period
in 2021. Research and development expenses increased by $22.4 million in the
2022 period due primarily to the additional activities related to our Phase 3
clinical trials, an increase in head count, and an increase in stock
compensation expense. We expect our research and development expenses to
increase as we advance our clinical and preclinical development programs for
resmetirom.

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General and adminsitrative expenses


Our general and administrative expenses were $33.6 million for the nine months
ended September 30, 2022, compared to $25.6 million in the corresponding period
in 2021. General and administrative expenses increased by $8.0 million in the
2022 period due primarily to increases in commercial preparation activities,
including a corresponding increase in head count, and an increase in stock
compensation expense. We believe our general and administrative expenses may
increase over time as we advance our clinical and preclinical development
programs for resmetirom, prepare for commercialization, and expand our operating
activities, which will likely result in an increase in our headcount, consulting
services, and related overhead needed to support those efforts.

Interest income


Our net interest income was $1.1 million for the nine months ended September 30,
2022, compared to $0.3 million in the corresponding period in 2021. The increase
in interest income was due primarily to higher interest rates in 2022.

Interest expenses


Our interest expense was $2.3 million for the nine months ended September 30,
2022, compared to $0 million in the corresponding period in 2021. The increase
in interest expense was as a result of the Loan Facility we entered into with
Hercules during the second quarter of 2022.

Liquidity and Capital Resources


Since inception, we have incurred significant net losses and we have funded our
operations primarily through the issuance of capital stock and also from Loan
Facility and the proceeds from our 2016 merger transaction. Our most significant
use of capital pertains to salaries and benefits for our employees, including
clinical, scientific, operational, financial and management personnel, and
external research and development expenses, such as clinical trials and
preclinical activity related to our product candidates. We also are required to
make repayments of interest and principal on our Loan Facility with Hercules, as
described below.

As of September 30, 2022, we had cash, cash equivalents and marketable
securities totaling $153.2 million compared to $270.3 million as of December 31,
2021, with this decrease attributable to the funding of operations, partially
offset by $50.0 million drawn at closing in May 2022 from the Loan Facility with
Hercules. Our cash and investment balances are held in a variety of
interest-bearing instruments, including obligations of U.S. government agencies,
U.S. Treasury debt securities, corporate debt securities and money market funds.
Cash in excess of immediate requirements is invested in accordance with our
investment policy with a view toward capital preservation and liquidity.

We anticipate continuing to incur operating losses for the foreseeable future.
Subject to the considerations noted below, our rate of cash usage will likely
increase in the future, in particular to support our product development and
pre-commercialization efforts. Our future long-term liquidity requirements will
be substantial and will depend on many factors. To meet future long-term
liquidity requirements, we will need to raise additional capital to fund our
operations through equity or debt financings, collaborations, partnerships or
other strategic transactions. We regularly consider fundraising opportunities
and may decide, from time to time, to raise capital based on various factors,
including market conditions and our plans of operation. This includes, but is
not limited to, the use of a $200 million at-the-market sales agreement entered
into in June of 2021, with Cowen and Company, LLC (the "2021 Sales Agreement"),
pursuant to which we may, from time to time, issue and sell shares of our common
stock up to established limits. We may also draw on additional tranches of debt
under our $250 million Loan Facility with Hercules based upon achievement of
resmetirom clinical and regulatory milestones and conditions. However, there is
no assurance that additional capital and financing will be available on terms
acceptable to us, or at all. See "Risk Factors" in Part I, Item 1A of our Annual
Report for the year ended December 31, 2021 and in Part II, Item I.A of our
quarterly report on Form 10-Q for the period ended March 31, 2022, which
includes a description of the risks related to our liquidity requirements,
financial position and need for capital. In addition, if such capital or
financing is available, any sales of additional equity securities may result in
dilution to our stockholders, and any additional debt financing may include
covenants that restrict our business.

Based upon our current operating plans, and the Company's cash, cash equivalents
and marketable securities totaling $153.2 million as of September 30, 2022, the
Company expects, that such resources will not be sufficient to fund our
operating expenses and capital requirements through the one year anniversary of
the filing of this Quarterly Report on Form 10-Q. These conditions raise
substantial doubt about our ability to continue as a going concern under ASC
205-40. While management currently believes this shortfall can be addressed by
future financings and capital issuances, or by delaying certain clinical studies
or pre-commercialization expenses if necessary, under the requirements of ASC
205-40, management may not consider in its assessment of the Company's ability
to meet its obligations for the next twelve months the potential for future
capital raises through debt or equity financings, collaborations, partnerships
or other strategic transactions, or management plans to reduce costs that are
not considered probable under these accounting standards. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. The inability of the Company to obtain sufficient funds on
acceptable terms when needed: could have a material adverse effect on the
Company's business, results of operations and financial condition; could result
in

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the Company delaying, reducing or eliminating some or all of its research and
development programs, clinical studies or pre-commercialization efforts; could
adversely affect the Company's business prospects; and could affect the
Company's ability to maintain compliance with covenants under the Loan Facility.
Although the Company has been successful in raising capital and financing in the
past, there is no assurance that it will be successful in obtaining such
additional financing on terms acceptable to the Company, if at all.

loan facility


On May 9, 2022, we and our wholly-owned subsidiary, Canticle Pharmaceuticals,
Inc., entered into the $250.0 million Loan Facility with the several banks and
other financial institutions or entities party thereto (each, a "Lender" and
collectively referred to as the "Lenders"), and Hercules, in its capacity as
administrative agent and collateral agent for itself and the Lenders. Under the
terms of the Loan Facility, the first $50.0 million tranche was drawn at
closing. The Company may also draw up to an additional $125.0 million in two
separate tranches upon achievement of certain resmetirom clinical and regulatory
milestones and conditions. A fourth tranche of $75.0 million may be drawn by the
Company, subject to the approval of Hercules.

The Loan Facility has a minimum interest rate of 7.45% and adjusts with changes
in the prime rate. The Company will pay interest-only monthly payments of
accrued interest under the Loan Facility for a period of 30 months, which period
may be extended to 36, 48, and 60 months upon the successive achievement of
certain clinical and regulatory milestones and if the Company maintains
compliance with applicable financial covenants. The Loan Facility matures in May
2026 and may be extended an additional year upon the achievement of certain
clinical and regulatory milestones.

As of September 30, 2022, the outstanding principal under the Loan Facility was
$50.0 million. The interest rate as of September 30, 2022 was 10.20%. Please see
"Note 6 - Long Term Debt" to the condensed consolidated financial statements
included in this Quarterly Report on Form 10-Q for information on the Loan
Facility.

Cash flow


The following table provides a summary of our net cash flow activity (in
thousands):

                                                           Nine Months Ended September 30,
                                                             2022                   2021
Net cash used in operating activities                   $      (166,342 )      $      (135,866 )
Net cash provided by (used in) investing activities             140,299                (20,698 )
Net cash provided by financing activities                        49,114                151,734

Net increase (decrease) in cash and cash equivalents $23,071

$(4,830)



Net cash used in operating activities was $166.3 million for the nine months
ended September 30, 2022, compared to $135.9 million for the corresponding
period in 2021. The use of cash in these periods resulted primarily from our
losses from operations, as adjusted for non-cash charges for stock-based
compensation, and changes in our working capital accounts.

Net cash provided by investing activities was $140.3 million for the nine months
ended September 30, 2022, compared to $20.7 million used in for the
corresponding period in 2021. Net cash provided by investing activities for the
nine months ended September 30, 2022 consisted of $271.2 million from sales and
maturities of marketable securities, partially offset by $130.7 million used in
purchases of marketable securities for our investment portfolio. Net cash used
in for the corresponding period in 2021 consisted of $339.4 million of purchases
of marketable securities for our investment portfolio, partially offset by
$318.8 million from sales and maturities of marketable securities.

Net cash provided by financing activities was $49.1 million for the nine months
ended September 30, 2022, compared to $151.7 million for the corresponding
period in 2021. Financing activities for the nine months ended September 30,2022
consisted of $50.0 million from issuance of the Loan Facility, partially offset
by $0.9 million of loan issuance costs. Net cash provided by for the
corresponding period in 2021 consisted of $151.2 million from net proceeds from
issuances of common stock under an At The Market (ATM) sales agreement and
$0.5 million from the exercise of stock options.

Contractual Obligations and Commitments


Except for the future minimum payments due on the Loan Facility with Hercules
set forth in "Note 6 - Long Term Debt" to the condensed consolidated financial
statements included in this Quarterly Report on Form 10-Q, no significant
changes to contractual obligations and commitments occurred during the nine
months ended September 30, 2022, as compared to those disclosed in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the
SEC on February 25, 2022.

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